FTC Staff Comment Before the Federal Communications Commission In the Matter of Advanced Television Systems and Their Impact Upon the Existing Broadcast Service

V930003
COMMISSION AUTHORIZED
BEFORE THE
FEDERAL COMMUNICATIONS 	COMMISSION
WASHINGTON, 	DC 	20554
In the 	Matter 	of
Advanced Television Systems
and 	Their 	Impact 	upon 	the
Existing 	Television 	Broadcast
Service
)
)
)
)
)
)
MM 	Docket 	No. 	87-268
FCC 	92-438
Comment 	of 	the 	Staff 	of
The 	Bureau 	of 	Economics 	of	. 	. 	.the 	Federal 	Trade 	Comm1SS1on
February 	8, 	1993
• This 	comment 	represents 	the 	views 	of 	the 	staff 	of 	the
Bureau 	of 	Economics 	of 	the 	Federal 	Trade 	Commission. 	They 	are
not 	necessarily 	the 	views 	of 	the 	Commission 	or 	those 	of 	any
individual 	Commissioner. 	Inquiries 	regarding 	this 	comment 	should
be 	directed 	to 	Laurence 	Schumann 	(202-326-3359) 	of 	the 	FTC's
Bureau 	of 	Economics.

BEFORE THE
FEDERAL COMMUNICATIONS 	COMMISSION
WASHINGTON, 	DC 	20554
In 	the 	Matter 	of
Advanced 	Television Systems
and Their 	Impact 	upon 	the
Existing 	Television 	Broadcast
Service
)
)
)
)
)
)
MM 	Docket 	No. 	87-268
FCC 	92-438
Comment 	of 	the 	Staff 	of
The 	Bureau 	of 	Economics 	of. 	. 	.the 	Federal 	Trade 	Comm~ss~on
February 	8, 	1993
I. 	Introduction
The 	staff 	of 	the 	Bureau 	of 	Economics 	of 	the 	Federal 	Trade
Commission 	(FTC) 	appreciates 	this 	opportunity 	to 	submit 	a 	comment
in 	response 	to 	the 	Federal 	Communications 	Commission' s 	(FCC's)
Memorandum 	Opinion 	and 	Order/Third 	Report 	and 	Order/Third 	Further
Notice 	of 	Proposed 	Rule 	Making 	(Memorandum).1 	The 	Memorandum
contains 	certain 	final 	rules 	and 	decisions 	concerning 	the
• 	This 	comment 	represents 	the views 	of 	the 	staff 	of 	the
Bureau 	of 	Economics 	of 	the 	Federal 	Trade 	Commission. 	They 	are
not 	necessarily 	the 	views 	of 	the 	Commission 	or 	those 	of 	any 	.
individual 	Commissioner. 	Inquiries 	regarding 	this 	comment 	should
be 	directed 	to 	Laurence 	Schumann 	(202-326-3359) 	of 	the 	FTC's
Bureau 	of 	Economics.
1 	Memorandum 	Opinion 	and 	Order/Third 	Report 	and 	Order/Third
Further 	Notice 	of 	Proposed 	Rule 	Making, 	FCC 	92-438, 	MM 	Docket 	No.
87-268, 	October 	16, 	1992.
1

implementation 	of 	advanced 	television 	(ATV) 	in 	this 	country.2 	In
addition, 	the Memorandum solicits comment on certain proposed rules
and 	other 	aspects 	relating 	to 	the 	implementation 	of 	ATV. 	Among
these 	other aspects 	of ATV implementation 	is a 	request 	for comment
on 	whether 	there 	is 	any 	need 	to 	require 	that 	television
manufacturers 	produce 	receivers 	capable 	of 	receiving 	television
signals 	transmitted 	under 	both 	the 	current 	NTSC 	standard 3 and 	the
soon-to-be-adopted ATV standard during the transition period prior
to 	full 	conversion 	to 	ATV.
Our 	analysis, 	which 	is 	based 	on 	economic 	efficiency
considerations, 	suggests that requiring television manufacturers to
produce 	"dual-mode" 	television 	receivers 	capable 	of 	both 	NTSC 	and
ATV reception during the 	period prior "to 	full 	conversion to ATV 	is
most 	likely 	undesirable. 4 	Such 	a 	requirement 	may 	harm 	consumers
by 	limiting 	their 	choices 	and 	forcing 	them 	to 	purchase 	equipment
that 	they 	would 	not 	otherwise 	choose 	to 	purchase.
2 	These 	rules 	were 	issued 	after 	consideration 	of 	certain
petitions 	for 	reconsideration 	and/or 	clarification, 	as 	well 	as
comments 	and 	reply 	comments 	submitted 	in 	response 	to 	the 	Second
Report 	and 	Order/Further Notice 	of 	Proposed 	Rule 	Making, 	7 	FCC
Rcd. 	3340 	(1992).
3 	NTSC 	refers 	to 	the 	National 	Television Systems 	Committee,
which was 	established 	in 	1940 	to 	develop 	technical 	standards 	for
television 	broadcasts.
4 	This 	comment 	is 	based 	on 	positive 	economic 	analysis 	and
therefore 	does 	not 	explicitly address 	normative 	concerns 	falling
outside 	the 	scope 	of 	such 	an 	analysis. 	These 	and 	other 	concerns
not 	explicitly 	addressed 	in 	this 	comment 	should 	be 	considered
separately.
2

In 	the 	Memorandum, 	the 	FCC 	expresses 	concern 	that 	the 	dual-
mode 	z-equirement 	not 	"overly 	or 	prematurely 	burden 	consumers. ,,5
This 	concern 	for 	consumer 	welfare 	is 	consistent 	with 	views
previously 	expressed 	by 	the 	FCC 	supporting 	a 	market-oriented,
consumer-welfare 	approach 	to 	certain 	regulatory 	issues. 6 	If 	such
an 	approach 	is 	to 	be 	taken 	with 	this 	issue, 	then, 	before 	adopting
a 	dual-mode 	requirement, 	it 	would·be 	necessary 	to 	identify 	some
source 	of 	market 	failure 	that 	would 	prevent 	television
5
manufar.turers 	from producing the types 	of television sets demanded
by 	consumers. 	Our 	analysis 	suggests 	that 	the 	existence 	of 	such 	a
market 	failure 	appears 	unlikely.
II. 	Expertise 	of 	the 	staff 	of 	the 	Federal 	Trade 	Commission
The 	FTC 	is 	an 	independent 	regulatory 	agency 	responsible 	for
maintaining 	competition 	and 	safeguarding 	the 	interests 	of
consumers.? 	In 	response 	to 	requests 	by 	federal, 	state, 	and 	local
Memorandum, 	supra 	note 	1, 	p. 	61.
6 	For 	example, 	in 	Policies 	Regarding 	Detrimental 	Effects 	of
Proposed 	New 	Broadcast 	Stations 	on 	Existing 	stations 	(3 	FCC Rec.
638 	(1988», 	the 	FCC 	announced 	that 	economic 	harm 	to 	existing
stations 	would 	no 	longer 	be 	considered 	relevant 	to 	the 	decision
to 	grant 	a 	license 	to 	a 	new 	station. 	In 	National 	Association 	of
Broadcasters 	v~ 	FCC, 	740 	F.2d 	1190 	(D.C. 	Cir. 	1984), 	this·
consumer-welfare 	principle 	was 	applied 	to 	issues 	involving
competition 	among 	different 	methods 	of 	signal 	transmission. 	The
decision, 	supporting 	the 	FCC 	position, 	declared, 	..... 	existing
systems 	[of 	broadcasting] 	.•. 	have 	no 	entitlement 	that 	permits
them to 	deflect 	competitive 	pressure 	from 	innovative 	and
effective 	technology." 	Id., 	at 	1198.
7 15 	U.S.C. 	sections 	41-59.
3

government 	bodies, 	the 	staff 	of 	the 	FTC 	often 	analyzes 	regulatory
or 	legislative 	proposals 	that. 	may 	affect 	competition 	or 	the
efficiency 	of 	the 	economy. 	In 	the 	course 	of 	this 	work, 	as 	well 	as
in 	antitrust 	and 	consumer 	protection 	research, 	nonpublic
investigations, 	and 	litigation, 	the 	staff 	applies 	established
principles 	and 	recent 	developments 	in 	economic 	theory 	to
competi tion 	and 	consumer 	protection 	issues. 	The 	FTC 	staff 	has
previously submitted comments to the FCC on matters concerning the
allocation 	of 	spectrum 	in 	general, 	and 	on 	ATV 	in 	particular. 8
III. 	The 	Effects 	of Requiring 	Dual-Mode Reception
A. 	Introduction
The FCC asks 	for comment on "whether there 	is any necessity to
exercise 	[the 	FCC's] 	authority 	under 	the 	All 	Channel 	Receiver 	Act
to 	require manufacturers 	to produce receivers capable of both NTSC
8 See 	the 	Comment 	of 	the 	Staff 	of 	the 	Bureau 	of 	Economics 	of
the 	Federal 	Trade 	commission, 	Advanced 	Television Systems 	and
Their 	Impact 	Upon 	the 	Existing 	Television 	Broadcast 	Service,
Docket 	No. 	87-268 	(January 	31, 	1992). 	Also 	see 	Comments 	of 	the
Staff 	of 	the 	Bureau 	of 	Economics 	of 	the 	Federal 	Trade 	Commission,
Advanced 	Television Systems 	and 	Their 	Impact 	on 	the 	Existing
Television 	Broadcast 	Service, 	Review 	of 	Technical 	and 	Operational
Requirements: 	Part 	73-E, 	Television 	Broadcast 	stations,
Reevaluation 	of 	the 	UHF 	Television 	Channel 	and 	Distance
Separation 	Requirements 	of 	Part 	73 	of 	the 	Commission's 	Rules, 	MM
Docket 	No. 	87-268 	(September 	1, 	1988)i 	Comments 	of 	the 	Staff 	of
the 	Bureau 	of 	Economics 	and 	San 	Francisco 	Regional 	Office 	of 	the
Federal 	Trade 	Commission, 	Amendment 	of the 	Commission!s 	Rules
With 	Regard 	to 	the 	Establishment 	and 	RegUlation 	of 	New 	Digital
Audio 	Radio 	Service, 	GEN 	Docket 	No. 	90-357 	(January 	25, 	1991}i
Comments 	of 	the 	Staff 	of 	the 	Bureau 	of 	Economics 	of 	the 	Federal
Trade 	Commission, 	Amendment 	of 	Part 	74 	of 	the 	Commission's 	Rules
Concerning 	FM Translator Stations, 	Docket 	No. 	88-140 	(August 	15,
1988}i 	Reply 	Comments 	of 	the 	Staff 	of 	the 	Bureau 	of 	Economics 	of
the 	Federal 	Trade 	Commission, 	Revision 	of 	Radio 	Rules 	and
Policies, 	MM 	Docket 	No. 	91-140 	(September 	5, 	1991).
4

9
and 	ATV 	reception 	and 	on 	what 	the 	cost 	to 	consumers 	of 	such 	a
requirement 	would 	be.,,9 	The 	issue 	was 	raised 	in 	th':'s 	proceeding
by Future 	Images Today 	(FIT). 	FIT has 	proposed an ATV system that
could be 	received 	on 	conventional 	NTSC 	receivers, 	and 	argues 	that
the 	FCC 	is 	required 	by 	the 	All 	Channel 	Receiver 	Act 	to 	adopt 	a
system 	like 	the 	one 	it 	proposes. 10
In 	asking 	for 	comment 	on 	this 	issue, 	the 	FCC 	observes 	that
certain 	manufacturers 	believe 	that, 	as 	a 	practical 	matter, 	ATV
receivers 	produced 	in 	the 	transition 	period 	will 	be 	dual 	mode
anyway,11 	and 	that 	there 	is 	"no 	precise 	evidence" 	about 	the
relative 	costs 	of 	dual 	mode 	receivers. U 	Moreover, 	with 	regard 	~o
a 	dual-mode 	requirement, 	the 	FCC 	is 	concerned 	that 	it 	"not
Memorandum, 	p. 	7.
ro 	As 	discussed 	by 	the 	FCC, 	"[t]he All 	Channel 	Receiver Act
does 	not 	preclude 	selection 	of 	a 	broadcast 	transmission 	system
that 	requires 	new 	receivers. 	It 	also 	does 	not mandate 	the
manufacture 	of 	dual-mode 	receivers." 	[Memorandum, 	p. 	61].
Nonetheless, 	the 	All 	Channel 	Receiver Act 	does 	give 	the 	FCC 	the
authority 	to 	require 	that 	all 	television 	sets 	be 	capable 	of
receiving 	all 	television 	channels. 	Current 	FCC 	rules
implementing 	the 	All 	Channel 	Receiver Act 	prohibit 	Shipment 	in
interstate 	commerce 	of 	television 	receivers 	that 	are 	not 	"capable
of adequately 	receiving 	all 	channels" 	allocated 	to 	television
broadcasting. 	47 	U.S.C. 	§ 	303(s), 	47 	C.F.R. 	§15.117. 	These 	rules
were 	adopted 	in 	order 	to 	ensure 	that 	all 	television 	sets 	could
receive 	both 	VHF 	and 	UHF 	broadcasts, 	and 	could 	be 	modified, 	if
viewed 	as 	necessary 	by 	the 	FCC, 	should 	the 	FCC 	decide 	that 	a
dual-mode ATV/NTSC 	requirement 	is 	not 	necessary.
11 	The 	FCC 	cites 	comments 	by 	both 	Zenith 	and 	Sony. 	See
Memorandum, 	p.61, 	footnote 	311.
U 	Costs 	of ATV 	receivers 	are 	still 	difficult 	to 	estimate.
There 	is 	some 	evidence 	that 	the 	cost 	of 	adding 	NTSC 	capability 	to
ATV 	receivers 	could 	be 	$50 	to 	$100, 	and 	the 	cost 	of 	adding 	an ATV
"downconverter" 	to 	an 	NTSC 	receiver 	could 	be 	about 	$200 	by 	the
end 	of 	the 	conversion 	period. 	See Memorandum, 	pp. 	37-40.
5

establish manufacturing requirements that may overly or prematurely
burden 	consumers."
From 	the 	viewpoint 	of 	economic 	efficiency, 	a 	dual-mode
receiver 	requirement 	could 	be 	justified 	only 	if 	it 	could 	be
demonstrated that some market 	failure would prevent the production
and 	distribution 	of 	television 	receivers 	that 	consumers 	demand.
The 	FCC' s 	other 	actions 	in 	this 	proceeding 	have 	already 	set 	a
timetable for the 	full 	conversion of broadcast signals from NTSC to
ATV. 	Consumers' 	interests 	can 	best 	be 	served 	by 	permitting 	the
production 	of 	different 	types 	of 	television 	receivers, 	so 	that
consumers can choose 	for 	themselves the e~~ipment that they prefer
for 	viewing 	ATV 	broadcasts.
B. 	Background
Under 	the 	final 	rules 	contained 	in 	the 	Memorandum, 	full
conversion 	to 	an 	ATV 	system 	will 	be 	required 	fifteen 	years 	after
"the 	effective 	date 	of 	ATV 	system 	selection 	or 	an 	ATV 	Allotment
Table, 	whichever 	is 	later. ,,13 	Existin~ 	broadcasters 	will 	be
required 	to 	apply 	for 	and 	construct 	an 	ATV 	facility 	during 	the
first 	six 	years 	of 	this 	fifteen-year 	transition 	period. 	One 	year
after 	the 	application/construction 	period 	ends 	(i.e., 	seven 	years
into the transition period), 	50 percent of all ATV broadcasts will
be 	required 	to be simulcast on NTSC systems. 	Two years 	thereafter
(nine 	years 	into 	the 	transition 	period) 	100 	percent 	of 	all 	ATV
broadcasts 	will 	be 	required 	to 	be 	simulcast 	on 	NTSC 	systems. 	Six
13 	Memorandum, 	p. 	4. 	The 	selection 	of 	an 	ATV 	standard 	is
expected 	sometime 	in 	1993.
6

years 	later, 	the 	fifteen-year 	transition 	to 	ATV 	will 	be 	complete
and 	all 	NTSC broadcasting 	will 	cease.
The 	purpose 	of 	the 	simulcast 	requirement 	is 	to 	"help 	ensure
that 	consumers 	are 	not 	prematurely 	deprived 	of 	the 	benefits 	of
existing 	television 	receivers .•• 	[and 	to] 	protect 	consumer
investment 	in 	NTSC. ,,14 	In 	addition, 	by 	permitting 	consumers 	to
view 	ATV 	programming 	on 	NTSC 	equipment, 	simulcasting 	may 	be
beneficial 	to 	consumers 	who 	do 	not 	SUfficiently 	value 	ATV
broadcasts 	to 	justify 	the 	purchase 	of 	an 	ATV 	receiver. 	When 	such
consumers 	purchase 	new 	television 	sets 	dur~ng 	the 	fifteen 	year
transition 	to 	ATV, 	some may 	prefer, 	absent 	a 	dual-mode 	production
requirement, 	to 	buy 	an 	NTSC 	television 	and 	later 	(once 	NTSC
simulcasts 	cease) 	buy 	a 	downconverter 	to 	transform ATV 	signals 	to
NTSC 	signals.
c. 	Analysis
Absent 	market 	failure, 	television 	manufacturers 	have 	strong
incentives to produce the types of receivers demanded by consumers.
Given 	that 	the 	FCC has 	already mandated 	that 	broadcasters 	convert
to ATV transmissions according to a 	set 	fifteen-year 	timetable 	(at
which time NTSC broadcasts will no 	longer be permitted), 	consumers
will 	have 	a 	strong 	incentive 	to 	invest 	in 	ATV 	compatible
equipment. 15 	As 	noted 	above 	by 	the 	FCC, 16 	some 	television
14 	"Broadcast 	Services; 	Advanced 	Television 	Systems,"
Federal 	Register 	57, 	No. 	219 	(Thursday, 	November 	12, 	1992), 	p.
53593.
15 	ATV 	compatible 	equipment might 	include 	not 	only ATV
receivers, 	but 	also 	downconverters 	that 	allow ATV broadcasts 	to
be 	viewed 	on 	NTSC 	television 	sets.
7

manufacturers 	believe 	that 	during 	the 	transition 	period 	prior 	to
full 	ATV 	conversion, 	ATV 	television 	sets 	will 	be 	dual-mode 	even
absent 	any 	such 	requirement. 	Compelling 	dual-mode 	NTSC/ATV
receivers, 	therefore, 	seems 	an 	unnecessary 	means 	of 	ensuring 	that
consumers 	are 	able 	to 	buy 	television 	sets 	that 	can 	receive 	both
NTSC 	and 	ATV 	signals. 17 	Moreover, 	the 	regulation 	could 	hurt 	some
consumers by eliminating options that would otherwise be available
to 	them.
Absent a dual-mode requirement, 	television manufacturers might
produce 	separate 	single-mode 	NTSC 	and 	ATV 	sets 	during 	the
transition 	period. 	Should 	the 	FCC 	require 	that 	televisions
manufactured 	during 	the 	fifteen 	year 	ATV 	transition 	period 	be
capable 	of 	both 	NTSC 	and 	ATV 	reception, 	the 	FCC 	might 	reduce
consumer 	welfare 	by 	forcing 	consumers 	who 	would 	otherwise 	choose
NTSC-only equipment to also purchase ATV equipment. 	Further, 	with
a 	dual-mode 	requirement, 	some 	consumers 	who 	might 	prefer 	to
16 ( ... continued)
16 	See 	footnote 	11 	above 	and 	the 	related 	discussion 	in 	the
text.
17 	Allowing 	consumers 	to 	continue 	to 	buy 	NTSC 	sets 	will
provide 	valuable 	information 	on whether 	or 	not 	the 	mandatory
conversion 	to 	strictly ATV 	transmissions 	i~ serving 	consumers'
interests. 	If 	large 	numbers 	of 	consumers 	voluntarily 	buy 	NTSC
sets with 	downconverters, 	notwithstanding 	the 	availability 	of ATV
broadcasts 	and 	ATV 	receivers, 	this 	would 	suggest 	that 	for 	these
consumers 	the 	benefits 	of ATV 	reception 	does 	not 	cover 	the
associated 	costs. 	This 	information would 	be 	most 	useful 	during
the 	reviews 	of 	the 	simulcast 	and 	conversion deadlines 	scheduled
for 	the 	years 	1999, 	2002, 	and 	2008 	(see 	Memorandum, 	pp. 	4-5).
The 	FCC's 	plan 	to 	periodically 	review 	the 	conversion 	deadlines
indicates 	a 	recognition 	of 	the 	importance 	of 	a 	flexible 	approach
to 	regulation 	in 	this 	matter.
8

purchase 	just 	ATV 	equipment 	would 	be 	forced 	to 	purchase 	unwanted
NTSC equipment.
One would expect that the transition from NTSC broadcasting to
ATV broadcasting will 	not be accomplished at a 	uniform rate 	across
the host of 	individual television statio~s throughout the country.
Some 	broadcasters 	might 	face 	financing 	delays 	or 	construction
delays, 	while 	still 	other 	broadcasters 	might 	install 	new 	ATV
facilities relatively quickly. 	Similarly, 	all or most broadcasters
in some areas of the country may have fully operational ATV systems
during 	periods 	in 	which 	other 	metropolitan 	areas 	have 	very 	few
operational ATV systems. 	Consumers in areas with a 	large number of
ATV 	broadcasters 	might 	place 	relatively 	less 	value 	on 	NTSC
equipment 	than 	consumers 	in 	areas 	with 	fewer 	ATV 	systems 	in
operation. 	Should 	the 	FCC 	require 	that 	manufacturers 	produce
televisions 	that 	are 	capable 	of 	both 	NTSC 	and 	ATV 	reception, 	the
FCC might 	force 	some consumers 	in the 	former group to pay 	for NTSC
equipment 	that 	they 	otherwise 	would 	not 	purchase.
Absent 	market 	failure, 	economic 	efficiency 	and 	consumer-
welfare 	considerations 	would 	not 	support 	eliminating 	options 	that
consumers 	might 	desire. 	Although 	economists 	have 	identified
certain 	market 	failures 	that 	can 	impede 	the 	transition 	from 	an
older technological 	standard to 	a 	newer one,18 the 	FCC's 	announced
18 	See, 	for 	example, 	Besen 	and 	Johnson, 	Compatibility
Standards, 	Competition, 	and 	Innovation 	in 	the 	Broadcasting
Industry, 	RAND 	Publication 	No. 	R-3453-NSF 	(November 	1986);
Farrell 	and 	Saloner, 	"Standardization, 	Compatibility and
Innovation," 	RAND Journal 	of 	Economics 	16 	(1985), 	70-83; 	Katz 	and
Shapiro, 	"Network 	Externalities, 	Competition, 	and 	Compatibility,"
(continued ... )
9

commitment 	to 	full 	conversion 	will 	make 	such 	potential 	problems
irrelevant 	in 	this 	case.~ 	Based 	on 	the 	FCC's 	action 	to 	date,
market failure would likely not prevent the adoption of ATV because
regulation, 	rather 	than 	the 	market, 	would 	be 	-imposing 	the 	new
standard.
Given 	the 	FCC's 	commitment 	to 	full 	ATV 	conversion, 	consumer
demand 	for ATV-compatible receivers will be created. 	Depending on
the 	configuration 	of 	consumer 	preferences, 	this 	demand 	will 	call
forth 	the 	production 	of 	some 	as-yet 	unknown 	mix 	of 	ATV-only,
(convertible) 	NTSC, 	and 	dual-mode 	receivers. 	Under 	a 	consumer
welfare 	standard, 	requiring 	that 	only 	dual-mode 	receivers 	be
produced during 	the transition period would be 	justified only 	if a
18 ( ••. continued)
American 	Economic 	Review 	75 	(1985) 	424-440; 	"Product
compatibility 	Choice 	in 	a 	Market 	with 	Technological 	Progress,"
Oxford 	Economic 	Papers 	38 	(1986) 	146-165; 	and 	"Technology
Adoption 	in 	the 	Presence 	of 	Network 	Externalities," 	Journal 	of
Political 	Economy 	94 	(1986) 	822-841. 	These 	theoretical 	analyses,
and 	their 	relevance 	to 	policy-makers, 	are 	discussed 	in 	the 	FTC's
Digital 	Audio 	Radio 	Services 	comment, 	supra 	note 	8.
19 	These 	forms 	of market 	failures 	result 	from 	uncertainty
over whether 	a 	new 	standard will 	be 	accepted 	by 	consumers 	and
manufacturers. 	For 	example, 	early 	adopters 	of 	a 	new 	technology
might 	risk 	losing 	their 	investment 	if 	acceptance 	of 	the 	new
technology 	is 	not 	widespread, 	Le., 	they 	risk 	being 	"stranded"
with 	a 	low-valued 	technology 	unless 	other 	consumers make 	the 	same
choice 	(e.g., 	consumers 	that 	purchased 	Beta 	format 	VCRs 	may 	have
been 	"stranded"). 	Such 	risks 	may 	lead 	consumers 	to 	defer
adopting 	a 	new 	technology 	until 	the 	choices 	of 	other 	consumers
are 	known. 	If 	enough 	potential 	buyers 	act 	this 	way, 	such 	"excess
inertia" 	may 	prevent 	the 	adoption 	of 	an 	efficient 	technology 	even
though 	consumers 	might 	be 	better-off 	if 	it were 	adopted. 	Such
potential 	market 	failures 	are 	not 	relevant 	here 	because 	the 	FCC
is 	imposing 	the 	new 	standard 	and, 	ultimately, 	eliminating 	the 	old
NTSC 	standard. 	Thus, 	by 	imposing 	a 	single, 	specific broadcast
standard, 	the 	FCC 	eliminates 	any 	uncertainty 	with 	regard 	to 	which
broadcast 	standard 	consumers, 	broadcasters, 	and 	television
manufacturers 	might 	choose.
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sufficient 	number 	of 	consumers valued 	dual-mode 	receivers 	by more
than 	their 	production 	~ost so 	as 	to 	justify their 	production, 	but
manufacturers 	ignored 	or 	disregarded 	these 	preferences. W 	This
seems 	to 	us 	unlikely. 	We 	are 	not 	aware 	of 	any 	reason 	why
television manufacturers would pass up the opportunity to profit by
selling receivers to consumers who wish to buy them. 	Accordingly,
current 	information 	would 	not 	appear 	to 	justify 	imposing 	a 	dual-
mode 	receiver 	requirement.
v. 	Conclusion
Our analysis suggests that requiring production of dual-mode
television 	receivers 	will 	not 	serve 	consumers' 	interests. 	This
requirement 	may 	restrict 	consumers' 	choices 	and 	may 	force 	some
consumers 	to 	purchase 	certain 	types 	of 	equipment 	that 	they
otherwise would 	not 	voluntarily 	choose 	to 	purchase.
Once 	the 	transition 	to 	ATV 	begins, 	demand 	for 	NTSC-only 	or
ATV-only 	receivers 	might 	be 	so 	low 	that 	only 	dual-mode 	television
sets will be manufactured. 	Nonetheless, 	the demand for single-mode
NTSC 	or ATV 	receivers 	may 	be 	sufficient 	to 	allow manufacturers 	to
W 	Problems 	could 	arise, 	at 	least 	initially, 	if 	some
consumers 	are 	unaware 	of 	the 	FCC's 	timetable 	for 	the 	transition
to 	ATV. 	Such 	consumers, 	for 	example, 	might, 	on 	account 	of 	their
ignorance 	concerning 	the 	transition, 	purchase 	NTSC-only 	equipment
When,. 	if 	they 	were 	fully 	informed, 	they 	would 	prefer 	dual-mode
equipment. 	Such 	potential 	problems 	notwithstanding, 	the
manufacturers 	of 	ATV 	and 	dual-mode 	television 	sets 	and 	television
broadcasters 	will 	have 	very 	strong 	financial 	incentives 	to 	ensure
that 	consumers 	are 	fully 	informed. 	If 	the 	FCC 	is 	concerned 	about
harm 	to 	uninformed 	consumers, 	steps 	to 	disseminate 	and/or
disclose 	information 	concerning 	the 	transition 	would 	be
preferable 	to 	actions 	that 	would 	limit 	the 	choices 	available 	to
all 	consumers.
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profitably 	sell 	these 	types 	of 	receivers. 	Since 	the 	levels 	of
future 	d=_uand 	for 	dual-mode and single-mode NTSC and ATV receivers
are unknown, 	the interests of both consumers and manufacturers will
best be 	served 	by 	allowing 	all 	of 	these 	products 	to 	be 	produced.
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